Retirement Advantage has launched a protected index portfolio fund designed specifically in response to demand for drawdown.
The company claims the product is unique in the UK because it is designed to protect investors from market falls.
The fund will be run by Morgan Stanley and aims to achieve a balance of risk and volatility suitable for retirement investing using a multi-asset passively managed strategy containing funds from Vanguard UK and iShares across a number of global index-trackers and ETFs.
Protection is provided by Morgan Stanley using put options, with additional protection built in to ensure the fund never becomes cash locked.
If the unit price increases above the previous high, the protected amount locks in at 80 per cent of the new higher level.
Andrew Tully, pensions technical director at Retirement Advantage, said: “This fund has been designed with pension drawdown customers in mind, and aims to provide a high level of protection from major falls in stock markets.
“The fund can’t become cash locked, which is important in periods of high volatility, as we are currently experiencing.
“Combining this fund with the benefits of the Retirement Account is a compelling proposition for anyone looking for a degree of security and flexibility from their pensions.”
Market volatility - caused in part by uncertainty surrounding China - meant the FTSE 100 has fallen more than 14 per cent since pension freedoms came into effect on 6 April 2015.
Since April there has been a huge surge in the sale of drawdown and according to the ABI between the launch of pension freedoms and November £2.85bn was invested in 43,800 income drawdown products.
A report by Retirement Advantage published earlier this month found market volatility could have wiped 8 per cent off the value of a typical drawdown fund since April 2015.
Mark Pemberton, executive director at Morgan Stanley, said: “People need exposure to real assets when investing in retirement, but they also often want to limit downside risk.
“We are delighted to work with Retirement Advantage on this fund, where the fund’s protection mechanism protects the downside to 80 per cent or more, and therefore provides the security investors are looking for.”
Adviser View
Bob Wilson, director of Norwich-based GreenSky Wealth, said: “I would be interested to know how much it would cost because often these guaranteed products can have quite high charges on them which can outweigh the benefit of the protection.
“If the market falls, someone will have to pay something somewhere.”
